WSM | Q2 2025

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Overview

• Non-GAAP EPS of $2.00 beats by $0.20.

• Revenue of $1.84B (+2.8% Y/Y) beats by $10M.

KEY Takeaways

• Comparable sales rose 3.7% with every brand posting positive comps.

• EPS grew nearly 20% to $2, and operating margin reached 17.9%.

• Rejuvenation logged its seventh straight quarter of double-digit comps, and B2B grew 10%.

• New products, collaborations, and brand extensions continue to drive customer demand.

• Delivery performance and supply chain efficiency improved, with AI tools already cutting costs and speeding up service.

• Tariff exposure increased sharply, with the incremental rate doubling to 28%, although management is mitigating with vendor concessions, resourcing, U.S. manufacturing, and selective price increases.

• Full-year comparable brand revenue growth guidance was raised to 2%–5%, while operating margin guidance was held at 17.4%–17.8%.

• The balance sheet ended the quarter with nearly $1B in cash, no debt, and continued shareholder returns through buybacks and a 15% higher dividend.

NOTES

Williams-Sonoma (WSM) delivered another strong quarter for Q2, showing that the business can continue to perform even in the midst of unideal economic conditions.

Some quick highlights: comparable sales were up 3.7%, every brand posted positive comps, and earnings per share climbed nearly 20% to $2. Plus, operating margin came in at 17.9%, well above last year and ahead of expectations.

All of this happened while the housing market stayed sluggish and the industry as a whole went backwards, which highlights just how much Williams-Sonoma is outpacing its peers.

Management framed the story around three priorities: growth, customer service, and earnings.

Growth is coming from the familiar names—Pottery Barn, West Elm, and Williams-Sonoma—but also from newer brands. Rejuvenation, for example, has now notched seven straight quarters of double-digit comps, and the B2B segment grew another 10% as its contract business expands. Fresh product launches and designer collaborations are fueling momentum and bringing in new customers.

On the service side, Williams-Sonoma is pushing hard to make orders arrive on time and damage-free, with noticeable gains in supply chain efficiency. AI is starting to make a difference here, too.

They rolled out an AI-powered service assistant that’s resolving customer issues faster and cheaper, and they’re testing new digital design tools and even a culinary app. Because they own so much of their design, sourcing, and delivery process, they’re in a better spot than most retailers to put AI to work across the business.

The headwind everyone was focused on this quarter was—of course—tariffs. Since Q1, their incremental tariff rate has doubled to 28%, covering everything from China and Vietnam imports to metals like steel and copper.

Rather than just eat the costs, management has leaned on a six-point plan—renegotiating with vendors, resourcing production, leaning into U.S. manufacturing, and taking select price increases without losing competitiveness. Still, they admitted margins will come under pressure as the year goes on.

Even with the impact of tariffs, Williams-Sonoma raised its sales outlook. They now expect comparable brand revenue growth of 2% to 5% for the year.

Operating margin guidance, however, stayed at 17.4% to 17.8%—a way of leaving themselves breathing room if tariffs get worse.

The balance sheet is a big safety net here too: nearly $1 billion in cash, no debt, and ongoing buybacks and dividends, which were just raised 15% year over year.

On the call, analysts asked whether the strength in furniture hinted at a housing rebound, but management pushed back—it’s not so much the macro that’s causing this strong performance, it’s the product. Newness and innovation are what’s moving the needle.

Pricing was another hot topic. The company has nudged prices higher in places where they were too cheap for the quality offered, but avoided blanket increases. They stressed that customers are still finding the line accessible and a good value.

Looking ahead, management feels good about the second half, especially heading into the holiday season with Williams-Sonoma and Pottery Barn Kids in strong positions.

With that said, tariffs remain the wild card. The company is confident it has enough levers to pull if things change, but the volatility is real.

Still, the company’s balance sheet, brand strength, and ability to innovate give it plenty of room to keep playing offense.

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